It is almost as if all regulators and government arms have suddenly woken up to the need to rewrite rules in their spheres of influence.
The first salvo was by the government on the use of credit cards for foreign exchange transactions. The new norms took dual measures to make spending money overseas more cumbersome. While the first was aimed at preventing expenditure in foreign exchange beyond the prescribed $250,000 per year by an individual using credit cards — which escaped this limit earlier — the more troubling one was the imposition of 20 percent tax collection at source on all such transactions, irrespective of the quantum. This would have led to individuals making small payments paying 20 percent tax up front on all of them with the promise of getting a refund after they filed their annual income tax returns.
Thankfully, a clarification was issued saying that the tax would only apply to transactions beyond the Rs 7,00,000 threshold. The entire chain of events created a lot of confusion and caused a lot of angst.
The second set of norms related to expenses of mutual funds, whereby SEBI revised the maximum expense an asset management company could charge. The new expense cap will include GST and transaction charges and would be applied on the assets under management of the fund house and not on a specific scheme. While this is likely to reduce the cost for investors, fund houses and distributors of mutual fund schemes clearly weren’t amused.
Also Read: RBI's dilemma: How to communicate the difference between note withdrawal and demonetisation
The third was the indicated phase-out of the Rs 2000 currency note. While these notes will continue as legal tender, the RBI has advised individuals to deposit these notes in their bank accounts or exchange them for other denominated notes by September 30. It has been clarified that there is no limit on the total number of notes that can be exchanged, a cap of Rs 20,000 per transaction has been indicated to ensure there isn’t too much waiting period at the cash exchange counters. Unfortunately, till the clarifications came through, there was a lot of confusion on this count as well.
What didn't change
There were several other significant developments too in the past week, but these notable developments suggest that little has changed in the country despite all the talk of development and progress. The first was the big jostling within the Congress party on who would become the next Chief Minister of Karnataka. While the issue seems to have been amicably settled for now, who knows.
The other significant development was the Central government issuing an ordinance to wrest back powers given to the elected Delhi government by the Supreme Court with respect to services in Delhi. This too shows nothing has changed in Indian politics. The entire political class across party lines is guilty of such acts over the past many decades since our nation’s independence.
What also has not changed is governments making policies without fully comprehending their fallout — both at the state and Central level.
What’s clear is that in a rapidly changing regulatory environment, some things are still immune to change. Is that such a good thing?
Also Read: No ID proof required to exchange Rs 2,000 notes of up to Rs 20,000-limit at a time, SBI informs branches
The first salvo was by the government on the use of credit cards for foreign exchange transactions. The new norms took dual measures to make spending money overseas more cumbersome. While the first was aimed at preventing expenditure in foreign exchange beyond the prescribed $250,000 per year by an individual using credit cards — which escaped this limit earlier — the more troubling one was the imposition of 20 percent tax collection at source on all such transactions, irrespective of the quantum. This would have led to individuals making small payments paying 20 percent tax up front on all of them with the promise of getting a refund after they filed their annual income tax returns.
Thankfully, a clarification was issued saying that the tax would only apply to transactions beyond the Rs 7,00,000 threshold. The entire chain of events created a lot of confusion and caused a lot of angst.
The second set of norms related to expenses of mutual funds, whereby SEBI revised the maximum expense an asset management company could charge. The new expense cap will include GST and transaction charges and would be applied on the assets under management of the fund house and not on a specific scheme. While this is likely to reduce the cost for investors, fund houses and distributors of mutual fund schemes clearly weren’t amused.
Also Read: RBI's dilemma: How to communicate the difference between note withdrawal and demonetisation
The third was the indicated phase-out of the Rs 2000 currency note. While these notes will continue as legal tender, the RBI has advised individuals to deposit these notes in their bank accounts or exchange them for other denominated notes by September 30. It has been clarified that there is no limit on the total number of notes that can be exchanged, a cap of Rs 20,000 per transaction has been indicated to ensure there isn’t too much waiting period at the cash exchange counters. Unfortunately, till the clarifications came through, there was a lot of confusion on this count as well.
What didn't change
There were several other significant developments too in the past week, but these notable developments suggest that little has changed in the country despite all the talk of development and progress. The first was the big jostling within the Congress party on who would become the next Chief Minister of Karnataka. While the issue seems to have been amicably settled for now, who knows.
The other significant development was the Central government issuing an ordinance to wrest back powers given to the elected Delhi government by the Supreme Court with respect to services in Delhi. This too shows nothing has changed in Indian politics. The entire political class across party lines is guilty of such acts over the past many decades since our nation’s independence.
What also has not changed is governments making policies without fully comprehending their fallout — both at the state and Central level.
What’s clear is that in a rapidly changing regulatory environment, some things are still immune to change. Is that such a good thing?
Also Read: No ID proof required to exchange Rs 2,000 notes of up to Rs 20,000-limit at a time, SBI informs branches
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